However, the FW Act further provides that employees to whom an industry-specific redundancy scheme in a modern award or enterprise agreement applies are not covered by the redundancy pay provisions in the FW Act.
JFM experienced a severe reduction in business last year when it failed to renew contracts with Gold Coast City Council. On 11 November 2019, JFM issued a notice of redundancy to its employees advising the employees that they may be made redundant five weeks after the date of the notice.
More than five weeks after the date of the redundancy notice, Mr Fraser resigned from JFM as he was able to take up some casual work with another employer. Shortly after taking up work with the other employer, Mr Fraser requested his eight-week redundancy entitlement under the Award.
In the first instance,1 Commissioner Spencer granted a reduction of the $12,000 eight-week redundancy entitlement to zero pursuant to section 120(2) of the FW Act. The Commissioner found that even though Mr Fraser left JFM on his own accord, he was still entitled to redundancy pay given the industry specific redundancy scheme that is contained in the Award. This is due to clause 17.6 of the Award, which provides that an employee who leaves their employment once notice of termination has been given (due to redundancy) will still be entitled to a redundancy payment as if the employee had worked until the end of the notice period. However, JFM did not need to make this payment due to evidence which demonstrated its "stark incapacity to pay and to remain operational".
The FWC ultimately upheld the appeal and quashed the original decision.
The FWC has confirmed that its powers under section 120 of the FW Act to reduce a redundancy entitlement are limited to employees whose redundancy entitlements arise under section 119 of the FW Act. Many awards simply provide that the redundancy provisions in the award reflect those in the National Employment Standards (i.e. the provisions in s119 to s123 of the FW Act) and in those cases given the entitlement to redundancy pay comes from the FW Act, an application under section 120 to reduce a redundancy payment would still be valid.
Whilst industry specific redundancy schemes in awards are relatively uncommon, given the number of redundancies that are occurring in the current environment and the difficulties some employers may have in being able to fund redundancy payments, it is important before making a role redundant, that employers check whether the employee is covered by an award or enterprise agreement and, if so, whether that award or agreement contains an industry-specific redundancy scheme. If they do, employers will not be able to apply to the FWC to reduce a redundancy payment in these situations.
If you have any questions regarding your obligations to your employees in the wake of COVID-19, including any advice on redundancies, please get in touch with McCabe Curwood's Employment group.
1 JFM Civil Contracting Pty Ltd v Mr Cameron Fraser  FWC 2546.
2 Cameron Fraser; Construction, Forestry, Maritime, Mining and Energy Union v JFM Civil Contracting Pty Ltd  FWCFB 4866.